Tencent-backed broker Futu confidentially files for up to $500 million U.S. IPO: sources

HONG KONG (Reuters) - Futu Securities International, a Hong Kong-based online brokerage firm backed by Tencent Holdings (0700.HK), has filed confidentially for a U.S. initial public offering (IPO) of up to $500 million, people with knowledge of the matter said.

Futu, which allows investors to primarily trade stocks in Hong Kong and the United States, plans to make a public filing in the coming weeks and debut in New York in early 2019, the people said. The company is targeting a valuation of about $2.5 billion, one of the sources added.

Futu, founded in 2012 by one of Tencent’s earliest employees Li Hua, has been seen by some investors as the Chinese equivalent of Robinhood, a U.S.-based online brokerage start-up backed by Sequoia Capital and DST Global.

Apart from Tencent, Futu also counts venture capitalists Sequoia Capital China and Matrix Partners China as its backers, according to data provider Crunchbase. In 2017, it raised $145.5 million in its last fundraising round at a valuation of about $1 billion, according to Chinese media reports.

It has hired Goldman Sachs and UBS (UBSG.S) to work on the U.S. float, the sources said. Futu did not respond to a request for comment, while Goldman and UBS declined to comment.

Refinitiv publication IFR reported in June that Futu was in discussions with banks over a potential IPO that could raise $300 million to $500 million in Hong Kong or the United States.

Despite its connections to Hong Kong-listed Tencent, Futu opted for New York partially because of a faster listing pace and the soggy performance of most new listings in Hong Kong, said one of the people.

Just six of Hong Kong’s biggest 20 IPOs this year were trading above their offer prices a month after debut, Dealogic data shows, versus 16 on the New York Stock Exchange and 10 on Nasdaq.

“For Futu, it makes more sense to list in the U.S. which has better comparable peers and allows confidential filings. It doesn’t have to disclose key business and financial information to the market and rivals at the beginning,” the person said.

“It’s also easier to lure more U.S.-based new investors and raise its profile overseas as a New York-listed firm.”

The U.S. Securities and Exchange Commission allows firms, regardless of their revenue, to file a draft IPO registration statement confidentially before they unveil their financials.

Ride-hailing firm Uber [UBER.UL] has recently filed confidentially for its U.S. IPO, sources have said.

Futu’s total trading volume had exceeded HK$1.5 trillion ($192 billion) as of June, a fifteen-fold increase compared to that of June 2015, its website showed.

Its planned listing comes after Tencent Music Entertainment (TME.N), the music arm of Tencent, last week raised nearly $1.1 billion in its U.S. IPO after postponing the deal from mid October, because of a steep global stock market sell-off and fears of slowing global growth.

In total, Chinese companies have raised 9.1 billion from U.S. IPOs so far this year - the biggest amount since 2014, the year of Alibaba Group’s (BABA.N) record $25 billion IPO, according to Refinitiv data.

Reporting by Julie Zhu and Julia Fioretti in Hong Kong, additional reporting by Joshua Franklin in New York; Editing by Himani Sarkar